Spending Review: Reeves splashes cash across transport, healthcare and energy
Rachel Reeves has insisted her fiscal rules are “non-negotiable” as the Chancellor splurged on transport, tech and energy investment in her Spending Review, paving the way for further tax hikes in the autumn.
Reeves said she made “the choices necessary to fix the foundations of our economy” accusing the previous government of leaving a “£22bn black hole” as a “legacy” in the Autumn Budget, in which she unveiled £40bn in tax hikes.
Total departmental budgets will grow by 2.3 per cent a year in real terms, Reeves said, while defence spending is to increase to 2.6 per cent of GDP by April 2027, including spending on intelligence agencies. NHS spending would increase by an extra £29bn per year.
Spending on nuclear power infrastructure will rise to £30bn, including giving the green light to the £14bn Sizewell C nuclear power plant and spending on the Rolls Royce Small Modular Reactor (SMR) scheme, because it is the “right choice” for bills, jobs and growth.
Reeves also unveiled “the biggest cash injection into social and affordable housing in 50 years” with £29bn over the next decade, and confirmed £15bn in spending for regional rail and tram travel.
£52bn will be allocated to budgets in Scotland, £20bn for Northern Ireland and £23bn for Wales.
£190bn spending surge
The Spending Review also included £7bn to fund 14,000 new prison places, and £700m per year to go towards reforming the probation system. Police spending power will be increased by an average 2.3 per cent per year in real terms over the Spending Review period.
“My driving purpose since I became chancellor is to make working people in all parts of our country better off. To rebuild our school and our hospitals, to invest in our economy so that everybody has the opportunity to succeed after 14 years of mismanagement and decline by the party opposite,” Reeves said.
“We are starting to see the results,” the Chancellor said, adding that the “stability we have provided” has helped support four cuts in interest rates.
In total, there would be an extra £190bn more to the day-to-day running of public services over the course of the parliament.
Gilt yields fell following the publication of the Spending Review in an apparent vote of confidence in the Chancellor’s plans by markets, while the pound hovered around $1.35.
Stephen Millard, interim director of the National Institute of Economic and Social Research, said: “The Chancellor has yet again said that her fiscal rules are ‘non-negotiable’.
“But given the small amount of headroom at the time of the Spring Statement and the increases in spending announced since then, it is now almost inevitable that if she is to keep to her fiscal rules, she will have to raise taxes in the Autumn Budget.”